FAQ’s

Frequently Asked Questions:

Money is loaned on a revolving basis secured by accounts receivable and other assets. We can also assist in collecting and administering the receivables to optimize the turn on receivables and the client’s cash flow. The client controls the extension of customer credit. Annual clean-ups, compensating balances and other bank requirements are unnecessary.

Factoring is a way for business owners to get working capital to run their business and peace of mind to know they’ll get paid.

Traditional or old-line factoring is fairly straightforward and is designed for long-term relationships. Factoring is an agreement between a factor and a supplier, in which the factor purchases the business’s accounts receivable and, in non-recourse arrangements, assumes responsibility for the business’s customers financial inablility to pay. (The customer is typically a retailer, but it could be a wholesaler or a manufacturer as well.) If a customer is financially unable to pay , the factor makes the payment on undisputed, approved invoices. The factor approves the extension of credit to the customers, collects the accounts receivable from the customers and performs the related bookkeeping functions. As needed, the factor may also provide cash advances against open receivables prior to collection.

Accounts receivable financing is borrowing money against your accounts receivable and factoring is a more complete service which includes a purchase of the accounts, credit checking on customers along with guarantees (without recourse) on pre-approved accounts.

There are two costs typically associated with factoring: the factoring commission and, if applicable, the interest charged on advances made against receivables. The factoring commission is based on a percentage of factored volume and ranges between 1% and 2.5% percent of sales. It is based upon these variables:
• Factored sales volume
• Average invoice size
• Terms of sale
• Number of customers
• The credit worthiness of your customers

If advances are made: the interest rate is competitive with other short term revolving credit interest rates. Interest is charged monthly at a rate typically tied to prime, with the addition of a margin, based on the average daily amount advanced during that month.

Factoring can be used by companies of all sizes, from small privately-owned companies to large multi-national corporations. Most companies that use factoring tend to be privately-held and have annual sales between $500,000 thousand and $100 million.